Stock Market Viewpoint

Reading the Tea Leaves...

Thursday, December 27, 2012

Intraday Market Reversal

Stock Market Technical Analysis Blog

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In the market today we had a big sell-off in the morning then a reversal back up in the last two hours. At midday today, I sent out a number of tweets listing reasons why the market found support at that level. Shortly after, the SPY rallied for a $1.75 gain into the final hour.

Looking at the first chart cluster, 60-minute bars, we see the sell-off in the Nasdaq in the morning with a reversal taking it back up into the horizontal channel by the bell. The lower chart, VIX, we see the surge on up to the 21 level area that I discussed last night and then at midday you see the 60-min, shooting star reversal bar as the VIX started falling back down from the 4-month uphill black line channel. Note that it did close just above the center line of the 4-month channel which is actually neutral market-wise at best. It will have to drop through that center line tomorrow if they want to have the rally continue.

In the second chart cluster, we see the reversal bar in the SPY and below that the reversal bar in AAPL as it bounced from its lower blue channel line at midday today.

In the third chart cluster, we see the upper six Weekly bar charts show little change in the Sentiment EMAs. In the lower part of this cluster I added Daily candles charts of the Nasdaq, SPY, DOW, and XLF (Financial ETF) all showing Day long tailed hammer reversal candles and all four have an either basis line or standard two deviation Bollinger Band envelope support. The last two charts to the right show that the VIX and VXX both printed long tailed shooting star topping candles today.

In the fourth chart cluster first chart, the VIX hit the upper line of its 5-month uphill channel at midday today (which was one of my tweets) and fell well back down into the bell. Chart 2 top row, we see that AAPL did not break its lows from last week. Third chart top row, once again the market rebounded as AAPL touched down on its blue Day 432 EMA safety net line at midday today. Second and third row charts, the short term channel charts, we see that AAPL, S&P, DOW, and XLF closed not far out of their short term channels at the bell, especially the XLF, with AAPL still hugging the upper line of its 4-week downhill channel. In the bottom three charts, I posted an inner channel also being used on the VIX showing it tested a breakout but came back. Second chart, VXX, shows an extremely long tailed reversal bar today. Third chart, UUP, while it did break out of its downhill channel at the open, it came back down in it through the early afternoon and pretty much closed on the line at the bell.

All in all, everything is dressed up nice for a rally tomorrow but I am still holding to a neutral position (outside of intraday only option plays) because of two things in the above charts. The first is in the top cluster, lower chart of the VIX which stopped falling and came back up a little as it hit the center line of the 4-month uphill channel in the last 30-minutes. The VIX must drop below that center line tomorrow or this afternoon's rally was nothing more than a bounce off of multiple supports. The second reason is found in the lower cluster, UUP (Dollar Index) where it did not stay down in the channel. If it breaks out of the channel again tomorrow all bets are off. We are still highly vulnerable to any and all news blips coming about fiscal cliff developments or lack of.

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